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Rachel Reeves, the Chancellor of the Exchequer, has defended her decision to increase National Insurance contributions by companies in last week’s budget. She stated that the money was necessary to ensure the public finances were on a “firm footing,” as the budget outlined policies to increase spending by almost £70bn a year over the next five years. Almost half of this increase will be funded through tax hikes, including an increase in National Insurance contributions made by employers.
Although Reeves has been criticized for the rise in taxes, she has stated that she is “not immune” to such criticism. During an interview with Laura Kuenssberg on the BBC, she said that “we’ve got to raise the money to put the public finances on a firm footing.” The National Insurance rise will generate £20bn a year for the government, making it one of the biggest single tax-raising measures in history.
However, the decision has been criticized heavily, particularly by businesses. The Institute for Fiscal Studies has said that larger firms that hire low-wage workers will be hit the most. This, in turn, could result in fewer minimum wage jobs being available in the future. According to the Institute of General Practice Management, which represents GP practice managers, the average surgery will see its tax bill rise by around £20,000 a year.
During the interview, Rachel Reeves pointed out that the Conservative government cut National Insurance contributions made by workers without the money to do so. However, she did not reverse the move as it would be a “direct breach” of Labour’s manifesto. The Chancellor added that Labour had been forced to make “difficult choices,” but she believed that the economy was now “on a strong footing.”
In the same interview, the new leader of the Conservative Party, Kemi Badenoch, criticized the increase, stating that it would not result in growth and that it would “make all of us poorer.” Although she did not say whether she would reverse the decision or not, she did state that the Conservatives would be considering the economy “in a different way” to Labour
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